Average Plan Participants Cannot Understand Health Plan SPDs

Health care benefit plans’ summary plan descriptions (SPDs) are written at too high a level to allow “average participants” to identify and read important plan information, according to the results of a study recently prepared by the Employee Benefit Research Institute (EBRI). ERISA requires SPDs, plan participants’ main source of information on their health care plan, to be written in language that allows the “average participant” to identify and read important information on eligibility, benefits, and participant rights and responsibilities. EBRI’s report, How Readable are Summary Plan Descriptions for Health Care Plans?, appeared in the October 11 issue of EBRI Notes.

For the study, EBRI researchers analyzed the SPDs of 40 private sector single-employer and multi-employer health care plans. The SPD sample represented varied plan types, including one high-deductible health plan with a health savings account. The EBRI reviewers found that most SPDs were written at levels of difficulty higher than recommended for technical material, some at the first-year college reading level, others at the ninth-grade level, and others at nearly college graduate level. There was no difference in SPD reading levels between single-employer and multiemployer plans. Lower literacy is associated with lower understanding of health information, worse health, less use of preventive health services, and higher health care costs, the EBRI report pointed out.

This discovery is troublesome in light of the Department of Education’s conclusions that 43% of adults read either below or at the basic level of literacy for sentences and paragraphs and 34% for sentence fragments necessary to understand information about medicines and medical care. Fundamental literacy is a growing issue with the rise of the non-English-speaking immigrant population—studies have found that one-third or more of adults in the U.S. have a limited ability to read English.

The trend toward consumer-directed health plans (CDHPs) may make communications even more challenging, as these plans shift to plan participants significant responsibility for decision-making in the use of health care services, the EBRI researchers noted. Therefore, CDHP participant understanding of how these plans work is vital.

Expert readers in the health care benefit plan field examined the SPDs’ coverage of the following six topics:

1. medical necessity clauses;
   
   
2. the concept of the plan administrator’s decision prevailing in a court of law with respect to claims denials, unless the court finds the decision to be arbitrary and capricious;
   
   
3. claims filing and appeal procedures;
   
   
4. mental health and substance abuse benefits clauses;
   
   
5. preexisting condition coverage exclusion clauses; and
   
   
6. reimbursement or subrogation clauses.

The researchers pointed out that the study does not assess individual plan participants’ comprehension as opposed to their reading ability. A more accurate study would need to assess what an individual has learned about the plan after reading the SPD.

"Findings from this study suggest that fundamental improvements are needed in the readability of written SPDs, and that employers and plan administrators should explore the use of alternative methods of communication to plan participants beyond the written SPD," the researchers concluded.

The study report is available at http://www.ebri.org 

Reprinted with permission. © CCH

Health care benefit plans’ summary plan descriptions (SPDs) are written at too high a level to allow “average participants” to identify and read important plan information, according to the results of a study recently prepared by the Employee Benefit Research Institute (EBRI).